What Would Happen if you Built the Reverse of Amazon? It Might Look Something Like This …

Posted on May 1, 2014 | 0 comments


Amazon. It’s the company that evokes fear into more startups and venture capitalists looking to fund eCommerce businesses than any other potential competitor. Every pitch I’ve ever seen has led to the, “Would Amazon eventually do this? And could we then compete?” type questions.

But what if you could do the reverse of Amazon?

Amazon was early in spotting a macro trend – that physical, local retail had a few key disadvantages. The first is that it could carry limited inventory in stock because it had limited physical shelf space. The second is that the retailers were constrained by their high costs of local real estate and service staff relative to the costs of centralized warehouses where goods could be stacked high, sorted by robots, managed by RFIDs and then shipped via overnight to eager, cost-conscious customers across the US.

Today’s $24 billion storage market in the US has these same key disadvantages and that was the genesis of Sam Rosen’s initial idea for MakeSpace, which I initially funded 15 months ago. We always had the added advantage that I have never met a single person in my life who ever said anything positive about their storage provider or experience. It always went something like this, “We had to buy boxes and pack them to the hilt and we had to run 4 separate runs to a facility 30 minutes from my house in a dodgy neighborhood and schlep up to the third floor where we stored our goods under a lock and key. 9 months later I didn’t have a blooming clue what was in there or whether I should still be paying for it.”

This laughable customer experience is practically parodied in real life by the popular reality TV show, “Storage Wars.”

Bill Gross, who is one of the Godfathers of the Internet, once told me, “If you don’t design a product that is 10x better than the competition then you’ll never build anything truly big or amazing.”

That’s what we’ve set out to build at MakeSpace. 10x the experience. It’s Amazon, Virgin America, Netflix, Tesla, DropBox, iPhone, Uber, Lyft or any one of the other great brands that exist because they do things significantly better than what came before.

Display Ad - Pack Me versionBut while Amazon blew away existing physical distribution channels to deliver products to you, we are blowing away existing physical infrastructure to help you store the things you want to keep – just not at your home. We have been offering local pick-ups in our storage vans at your apartment in NYC for just under a year and already have an enormous client base – demand has exceeded our supply as we’ve had to onboard more pickup vans & drivers to add pick-up capacity.

And while we were started in NYC we now have a nationwide service thanks to the product launch of MakeSpace Air – the first of its kind – that allows you to ship your stuff to MakeSpace and we’ll pay for the shipping (both ways!). I say nationwide but we’ve actually had people ship us stuff from as far away as Tokyo if you can believe it. And while we launched the service thinking it would be mostly a consumer offering we were surprised how many small businesses were looking to clear away their marketing materials and such into a convenient storage offering.

So today I’m excited to announce that Upfront Ventures is leading an $8 million round with some amazing co-investors including Founder’s Fund, OATV, Lowercase, High Peaks, Collaborative Fund and many great angel investors.

We pride ourselves on being early-stage (thus the name, Upfront) but in this case it’s as early as it gets.  The journey just under 18 months ago with a coffee meeting with my friend Sam Rosen in NYC just after Hurricane Sandy. Parts of the city still didn’t have power restored when we met. He told me that his girlfriend (at the time) had lost a lot of stuff and they were thinking about storage solutions and the experience was terrible. He had an idea to make it better. He would pick up stuff from your apartment and bring it to storage for you and he could save money by having that facility be off site.

We then riffed on the idea of, “That’s interesting. But what would truly be amazing is if you could build ‘DropBox for your physical stuff’.” Boom. We both loved the idea and within weeks he was moved to LA and worked out of our office on the concept as an EIR. I wrote about that experience here without giving away the details of the business.

He spent a few months building out the software because just taking stuff from people isn’t that difficult. He hired his co-founder and CTO Adam LeVasseur who set out to build systems to allow you to see all of your storage items in a beautiful app but also to build tech for logistics, driver management, customer service, billing and so forth. After 9 months it was time to raise seed capital and go test drive our new software and processes.

Sam moved back to NY and we announced our seed round of capital, which we led. One of the main co-investors was High Peaks capital and one of their team members, the uber talented Rahul Gandhi, loved the deal so much he quit his career as a VC and jumped in as a co-founder. I guess he was as excited about the opportunity as I was! And for the next several months the founders literally ran the business. They did customer pickups, the drove vans to storage facilities, the deal with booking and customer support issues – everything. Full on burger flipping mode.

I was blown away by the customer reaction (if you have a minute have a quick read of some Yelp! reviews – every due diligence process should feel like this) to our nascent offering and the dedication and detail orientation of the MakeSpace team. We worked out our pricing, our tipping policies, insurance, logistics, package management – the works. And importantly we began to refine our processes for image collection. It’s true that your local storage provider will always have a cost disadvantage to us because we can store goods in a central facility with minimal local infrastructure costs. But when we’re spending millions of dollars on IT innovation to build a better user experience they simply can’t compete on the actual service. Try calling your local storage facility and tell them you one box 3 & 5 out of 9 delivered to you in 24 hours. Try getting them to send you anything at all! Or even to help you figure out what you have in storage without hauling your ass down to the facility and trolling through all of your old stuff.

We have lots of product innovations we’ll roll out in the next 12 months and I shouldn’t ruin any of the team’s surprises – including a very senior hire we made of somebody’s I’ve been hoping to work with for the past 7 years. I think the progress, opportunity and enthusiasm of the team and investors in MakeSpace was truly contagious – I can’t wait to announce his arrival soon.

I’ve been such a broken record over the last 12 months on why I believe MakeSpace will be a billion company, delivering the first truly differentiated cloud (physical) storage solution and a brand that consumers will love – that I think even my wife is a bit sick of hearing it ;-) Anyway,  am super excited to invest a larger check in MakeSpace’s operations, join the board of directors officially (I was an observer before) and start building New York’s next great startup company to help make this recent story on NYC tech look wide of the mark.  I’m long NY. I’m long MakeSpace.